Explosionhttp://www.maclife.com/taxonomy/term/8516/all
enApple Investigating Foxconn Plant Explosionhttp://www.maclife.com/article/news/apple_investigating_foxconn_plant_explosion
<!--paging_filter--><p><img src="/files/u220907/18948-foxconn-and-hon-hai-shares-fall-on-weak-earnings.jpg" alt="foxconn" width="200" height="150" class="graphic-right" />For those who hadn't heard yet, tragedy struck the Foxconn plant in Chengdu, China yesterday.&nbsp; It was being reported that at least two people died in the explosion and 16 were hurt in the blast at the plant.&nbsp; Foxconn is one of Apple's largest contract manufacturers, and Apple is working with Foxconn to understand what caused the event.<br /><br />"We are deeply saddened by the tragedy at Foxconn's plant in Chengdu, and our hearts go out to the victims and their families," Apple had said in <a href="http://mobilized.allthingsd.com/20110520/apple-says-working-with-foxconn-to-explore-cause-of-china-explosion/">a statement that was provided to All Things D</a>.&nbsp; "We are working closely with Foxconn to understand what caused this terrible event."<br /><br />Apple declined to say what the impact to production could be, or say anything further beyond the above comment.&nbsp; <br /><br />Foxconn would later provide the below statement:<br /><br /><em>We can confirm that at approximately 7 pm on May 20, there was an explosion at our Chengdu campus. At this point, we can also confirm that there were two fatalities with injuries to 16 other employees. We are working with medical officials to provide treatment to the injured employees and we are working with government and law enforcement officials to contact the families of all employees affected by this tragedy.</em></p><p><em><br />The situation has been brought under control by the fire department and the cause of this explosion is being investigated by local police officials. Foxconn is cooperating fully with that investigation. Production has been suspended at the site of the explosion until the completion of the investigation. The safety of our employees is our highest priority and we will do whatever is required to determine and address the cause of this tragic accident.</em></p><p><br />While Apple didn't provide the potential impact, <a href="http://tech.fortune.cnn.com/2011/05/20/what-the-foxconn-explosion-means-for-apple/"><em>Fortune</em> was reporting</a> that RBC Capital's Mike Abramsky was the first to provide a glimpse to clients in regard to the tragedy.&nbsp; Abramsky feels that the Chengdu plant is one of two primary facilities where the iPad 2 is produced, the other being the Shenzhen factory.&nbsp; His sources are quick to disagree though and believe that Chengdu was also having trouble ramping up, and that most iPads were still being manufactured in Shenzhen.</p><p>&nbsp;</p><p>Just the same, Abramsky developed two scenarios, one bad, and one good for Apple:</p><p>&nbsp;</p><p>1) Serious Business Impact - Under this scenario, Chengdu manufactures most iPads and the explosion is serious; i.e. Apple is unable to utilize alternatives or get back on stream by June. If so, it could be negative for Apple's Q3 (June); stoppage of Chengdu until end June may equate to the lost production of 1.8-2.8M units Q3, which is 22-36% of our expectations for 8M iPad shipments Q3. If Foxconn is unable to pick up the slack by June, it could also cause production shortages for Q4/F11 (end Sept). Under this scenario, Q3 revenue may be impacted by $1.1-1.7B (4-7%) and EPS $0.35-0.55 (6-9%), which at current valuation represents $5-7 downside to shares.<br /><br />2) Less Serious Business Impact - Under this scenario, either Shenzhen still makes most iPads and is unaffected, and/or Foxconn is able to re-start iPad production quickly at Chengdu. Estimating a 1 month production impact, would perhaps equate to &lt;1.3M units Q3 with limited impact to Q4. Under this scenario, revenue would be impacted by &lt;$800M (&lt;3%) and EPS &lt;$0.26 (&lt;4%) which at current valuation represents less than $3 downside to shares.<br /><br />Regardless, our thoughts certainly go out at this time to those impacted by this horrific event.<br /><br /><em>Follow this article's author, <a href="http://www.twitter.com/mtilmann">Matthew Tilmann on Twitter</a></em><br /><br /><em>(Image courtesy of ibitimes.com) </em></p><p>&nbsp;</p>http://www.maclife.com/article/news/apple_investigating_foxconn_plant_explosion#commentsNewsappleeventsExplosionFactoryFoxconnImactnewsPlantsuppliessupplyTragedySun, 22 May 2011 01:51:26 +0000Matthew Tilmann11056 at http://www.maclife.com